At the time of writing, there have been 42 series of the British Channel 4 property show, Location, Location, Location, spread over 25 years. In an age of view on demand, if you committed eight hours a day for five days a week, it would take you six-and-a-half weeks to watch every episode. And that assumes you skip the advertisement breaks.

Over the past decade, the prime property market has been through its fair share of ups and downs, and the last five years have been no exception. Post-referendum, pre-Brexit malaise soon gave way to a pandemic-induced housing market boom which turbocharged the market for country homes, but largely bypassed central London.

That boom was brought to an abrupt halt by a sharp increase in mortgage costs over the course of 2022. And then last year, just as inflation appeared to be tamed and the prospect of interest rate cuts loomed on the horizon, a new government introduced a range of tax measures. These, combined with uncertainties in the current economy, have inhibited the kind of recovery in values at the top end of the market, which has tentatively found a foothold in the wider mainstream.

Re-evaluating central London

This has been most keenly felt in the rarefied markets of prime central London. Here, confirmation of the abolition of the ‘non-doms’ regime has reduced the pool of active buyers, while the imposition of a further 2% stamp duty liability for buyers of additional homes has given pause for thought at a time when tit for tat trade tariffs have weakened the outlook for the global economy.

This sector has a significant proportion of off-market deals, but data from TwentyCi on publicly marketed £5 million plus stock still paints a clear picture of market dynamics. It shows a tail-off in activity and the continuation of cuts to asking prices, as sellers adjust their expectations to attract interest.

Stock being brought to the market has risen over the past two years, though – importantly – it has fallen since Rachel Reeves rose to the despatch box in late October last year. And so, while there has been plenty of noise about people relocating to more welcoming tax jurisdictions, this has not precipitated a rush of sellers. This reflects the fact that there remain plenty of reasons for the global ultra-high-net-worth community to hold a property in London, even if they change their tax residence. Despite the current geopolitical uncertainty, London remains a safe haven. However, the buying power of both domestic and international players will, in all likelihood, be limited due to the volatility in global stock markets.

Our prime index shows prices in central London fell by -0.7% in the first quarter of the year, which sits against the context of our forecast for a -4.0% price adjustment over the course of the year; a low from which, in due course, we expect to see a gradual recovery as buyers look to exploit the value on offer.

Cautious optimism elsewhere

However iconic the stucco-fronted mansions of central London may be, such is their exclusive nature, they have not featured heavily in the country’s favourite property programme. The familiar duo of Phil and Kirstie have tended to pop up in more domestic prime locations, such as Chiswick, Cheltenham and Chester. The health of these markets is more heavily influenced by the cost and availability of debt, with aspiring upsizers underpinning a core of needs-based demand.

As shown in the results of our client survey, three base rate cuts between late summer 2024 and early spring 2025 have provided stability in the mortgage market and gradually increased the buying power of those using debt in such locations. Despite the recent uptick in inflation, the prospect of further, deeper rate cuts to protect the economy in 2025 should continue to make it easier for borrowers to pass lenders’ stress tests.

But, despite a pick-up in commitment to move, the changing tax environment and landscape for wealth creation has still meant the recovery in the prime markets has lagged that of the mainstream. ‘Non-doms’ changes have had much less of a direct impact, but they have meant that there hasn’t been the catalyst to start a ripple effect from the prime housing markets’ traditional epicentre.

VAT on school fees has undoubtedly tempered demand, with some buyers sitting on their hands as they work out the impact on their household finances. Others have been drawn to educational hotspots that provide strong state schooling or access to less expensive private education.

And so, whereas quarterly mainstream house price growth stood at 1.2% at the end of March, according to the Nationwide House Price Index, in the more domestic prime markets of London it was 0.1%, while in the prime regions outside of the capital it remained flat.

This quarter, prime price movements have been universally subdued, as buyers and sellers continue to weigh up their options against a backdrop of economic uncertainty. Annual changes reveal slightly more variation. By that measure, the strongest parts of the London market have been in the south west with growth of 0.8% and the north and east at 1.3%, underpinned by the prevalence of domestic, debt-reliant buyers in those submarkets.

Similarly, the midlands and north of England were the strongest regional performer, albeit at a marginal 0.9% annual growth. This is in contrast with annual falls of 4.6% across more discretionary coastal markets, as these second home hotspots absorb an additional 2% surcharge. As a general trend, best-in-class properties tend to sell the fastest across all markets.

And so, as we approach the spring market of 2025, the strength of demand for prime homes is as dependent on location, location, location as it ever was; perhaps even more so, given underlying market conditions. That means, with filming underway for the 25th anniversary series of a British TV staple, a look at the top end of the market would make compelling viewing.

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